The Evolving Landscape of eCommerce
In 2013, Andy Dunn (founder of Bonobos) wrote an incredibly insightful article on Amazon titled “E-commerce is a Bear”. In the article, he highlighted the challenges of eCommerce, Amazon’s dominance, and the struggle for other players to achieve profitability. A decade later, Bonobos has been bought and sold a couple of times and the e-commerce landscape has evolved significantly, particularly in the B2B sector. Many of Dunn’s observations about the difficulties of competing with Amazon in the B2C space remain relevant (and in hindsight probably understated), but the B2B arena has become a new battleground where Amazon’s influence is reshaping traditional distribution models.
Amazon’s B2B Expansion
Amazon Business, launched in 2015, has grown into a formidable player in the B2B e-commerce space. With its vast selection, competitive pricing, and efficient logistics, Amazon has forced traditional B2B distributors to rapidly adapt their strategies. The company’s move into this sector has been driven by the same principles that made it successful in B2C: leveraging its scale, technology, and customer-centric approach to disrupt established industries.
The Impact on US Distributors
Amazon’s acceleration into the B2B field has distributors hustling to make some changes in order to keep up. Here are five way distributions are trying to compete with Amazon:
- Digital Transformation Acceleration: Traditional distributors have been compelled to accelerate their digital transformation efforts. Companies that once relied on catalogs and sales representatives are now investing heavily in e-commerce platforms, mobile apps, and digital marketing to remain competitive.
- Pricing Pressure: Amazon’s transparent pricing model and ability to leverage its scale for competitive sourcing have put pressure on distributors’ margins. This has forced many to reevaluate their pricing strategies and find new ways to add value beyond just product fulfillment.
- Logistics and Fulfillment Innovation: To compete with Amazon’s efficient delivery network, distributors are investing in advanced warehouse automation, route optimization, and last-mile delivery solutions. Some are partnering with third-party logistics providers to enhance their capabilities. While B2B distribution is different from traditional B2C logistics, their technology, volume and expertise gives Amazon a formidable advantage.
- Value-Added Services: To differentiate themselves from Amazon, many distributors are focusing on value-added services such as technical support, product training, custom solutions, and industry-specific expertise that Amazon may struggle to replicate at scale.
- Marketplace Strategies: Some distributors are adopting marketplace models similar to Amazon’s, allowing them to expand their product offerings without the need for additional inventory investment.
Strategies for Success in the New B2B Landscape
In order to stay competitive with Amazon, B2B manufacturers need to be creative. We recommend implementing the following strategies:
- Proprietary Product Development: Distributors are increasingly developing their own branded products or exclusive partnerships with manufacturers. This strategy, similar to what Bonobos attempted in the B2C space, allows distributors to offer unique products that can’t be easily price-compared on Amazon.
- Vertical Specialization: Many distributors are focusing on specific industries or product categories where they can develop deep expertise and relationships that are difficult for Amazon to replicate.
- Enhanced Customer Experience: B2B buyers now expect the same level of user experience they enjoy in B2C transactions. Distributors are investing in intuitive e-commerce platforms, personalized recommendations, and omnichannel support to meet these expectations.
- Data-Driven Decision Making: Leveraging big data and analytics to understand customer behavior, optimize inventory, and predict market trends has become crucial for distributors to stay competitive.
- Strategic Partnerships: Some distributors are forming alliances with complementary businesses, or buying expertise and scale to create ecosystems and bundles of solutions that can better compete with Amazon’s breadth of offerings (e.g. HD Supply and The Home Depot, Ferguson and ServiceTitan, or Office Depot and Alibaba).
The Future of B2B Distribution
As we look ahead, the B2B distribution landscape will likely continue to evolve rapidly. While Amazon’s influence will undoubtedly grow, there remains significant opportunity for distributors who can adapt quickly and leverage their industry-specific knowledge and relationships.
The key to success will be finding the right balance between digital efficiency and human expertise. Distributors that can combine the convenience and scale of e-commerce with the trust and personalized service of traditional B2B relationships will be best positioned to thrive in this new environment.
Unlike the B2C e-commerce space, where Amazon’s dominance has been hard to challenge, the B2B sector’s complexity and diverse needs create opportunities for innovative distributors to carve out profitable niches and even scale to significant size.
As Andy Dunn’s original article highlighted the challenges of competing with Amazon in B2C e-commerce, today’s B2B distributors face a similar existential challenge……and you won’t outrun the Bear sitting still!
